Lexus is a luxury automobile brand that belongs to Toyota Motor Corporation. The brand was established in 1989, and it has gained global market popularity over time. Lexus remains the best selling brand in Japan’s premium cars. The brand name ‘Lexus’ is derived from two words ‘elegance’ and ‘luxury’, which represents the highest quality and technological image of the product. It has a mission to deliver high quality product that exceeds the customers’ expectations; this is accomplished through the provision of personal facility design and comprehensive consultation to the firm’s dealers. This mission is essential in ensuring that the company maintains a stable dealership facility. Lexus seeks to enhance customer satisfaction and loyalty through the provision of high tenure services. The vision statement is to maintain a professional and innovative outlook in the motor industry globally. These factors have enabled the brand to retain a competitive advantage over other competitors such as Benz.
The stakeholders, mission, and vision statements have played a major role in enhancing the Lexus’ success (Liker & Meier, 2007). The stakeholders include dealers, customers, shareholders, and the members of the society. The organizational mission and vision statements have ensured that the brand focuses on both the short-term and long-term targets to maintaining its current position in the global market. The mission has led to the creation of core values that govern the operational activities of the firm. A company can determine its progress by reviewing its mission and vision; the management team can identify errors in the firm’s activities by comparing the actual results with the set mission and vision statements (Campbell, & Craig, 2005). The firm’s management team seeks to maximize its shareholders’ value; this measure facilitates the company’s innovativeness, which is essential for increasing the product sales. There has been substantial improvement of the brand’s quality to enhance customer satisfaction; this factor has contributed to the company’s success due to high profit margins.
Porter’s Five Forces on Lexus
- Threat of New Entry into the Market
The threat of new entrants into the market is low in the motor industry due to the high initial investment required. It is difficult to overtake huge and dominating firms such as Toyota in the global market; this market force does not affect the Lexus brand. The capital required for research and development measures in the automobile industry hinders investors from venturing into the market (Liker & Meier, 2007). The R&D strategy is essential in the motor industry; Toyota used this approach while creating the Lexus brand. The company enjoys large economies of scale due to its leading position in the luxury automotive industry. Its fixed costs are limited, and the firm has an opportunity to maximize its revenue and profit levels. A new entrant into the industry has to struggle with increased costs due to the changing economic times (Tueth, 2010). The government policies limit new firms from entering the market; the existing companies do not encounter such, which makes them retain their competitive advantages.
- Threat of Substitutes
The brand faces a substitute threat from others such as Land Rover; though this is a competitor, it offers cheaper primary products compared to Lexus. The increasing demand for high quality luxury vehicles has contributed to the existence of substitutes in the market. The unfavorable economic conditions force customers to purchase cheaper products that provide similar utility as the luxury commodities. The Lexus brand requires significant strategies to enable it deal with the competitive force caused by substitutes in the automobile market.
- Suppliers’ Bargaining Power
The suppliers of luxury automobiles and parts exhibit a relatively high bargaining power. The luxury vehicles require high quality parts compared to other cars; they are scarce and expensive, which makes the suppliers have control over the bargaining capability. There are a few suppliers in the market, which gives them a decent power over the products’ prices. Lexus started giving its suppliers technological support, which has enabled them to improve the products (Kandori, 2007). This measure has reduced the suppliers’ bargaining power, as Lexus does not have to import materials. The situation has created competition among the existing suppliers, which has led to a decline in their bargaining power.
- Bargaining Power of Buyers
Individual buyers have no bargaining power over the Lexus brand. The presence of substitutes, however, has contributed to a high level of bargaining power in the industry. Customers have a choice to purchase cheaper products from firms such as Ford and Land Rover, which makes them retain some power regarding the products’ prices (Kandori, 2007). The recent global economic recession affected the luxury car sales; customers dictate the prices according to what they can afford. The increased awareness on the market has enabled them to have high bargaining power.
- Rivalry among Existing Competitors
Lexus has a minimal competitive rivalry in the automotive industry since the luxury automobile sector is well established. The high initial investment required makes it difficult for other automobile firms to enter the industry. The luxury automotive industry focuses on a different market segment from other firms, which minimizes the level of competitive rivalry.
Lexus’ SWOT Analysis
The Suitable Strategy to Enable Lexus Increase its Productivity
Lexus needs to capitalize on its strengths and opportunities while minimizing the threats and weaknesses. The firm needs to expand its market share through increased promotion tactics; many potential customers avoid the products due to the ‘high price’ perception. Advertising can create awareness among people, which will lead to increased sales for the brand (Dawson, 2011). Lexus can use its strong presence in racing events to create healthy customer relationships. This measure can enable the firm to attract new customers and maintain the loyalty of its existing clients. The brand should use its innovativeness nature to create products that are affordable to the low and medium income earners. Lexus has a strong brand in the global market; this gives the firm an opportunity to introduce a cheaper product to attract customers in other market segments.
Strategies to Improve Profitability and Competitiveness
Lexus can use both corporate and business level strategies to increase its profitability and competitiveness in the global market. The business-level strategies entail the measures incorporated in the firm’s activities to increase its efficiency. The brand has a weakness in the poor distribution channels; it is essential to establish a suitable network with reliable dealers to fill the existing gap. Offering training sessions to the distributors can increase their market knowledge, which is essential for the brand’s productivity and profitability. The marketing team should conduct market research to acquire relevant information regarding the changing demands of the potential customers. This measure will enable the firm to tailor the products according to the customers’ specifications. Customer information is essential in determining the weaknesses of a company; the knowledge can be incorporated into the production plan to enhance efficiency. Customer satisfaction can increase Lexus’ competitive advantage over other firms. Focusing on reducing the suppliers’ bargaining power can increase the profitability for Lexus as it results to reduction in costs. Lexus should establish core competencies for its products to eliminate the substitute threat in the luxury automotive industry.
The brand can adopt a corporate strategy that entails venturing into small and medium market segments. This measure will enable Lexus to increase its real and perceived market value in the global economy; this is a crucial tool for increasing sales and revenue base for the brand. Introducing a high quality affordable product to the market will facilitate the competitive advantage of the brand, especially in the untapped market segments.
An Effective Communication Plan for Lexus
A communication plan describes a firm’s planned activities with the message it sends to the stakeholders. The plan outlines the organization’s objectives, strategies, and the intended recipients. It explains the purpose of the communication, the people responsible for formulating the message, and the expectations. Lexus can deliver a communication plan to the stakeholders explaining the suitable strategies that can enable the brand increase its profitability and competitiveness in the global market.
Lexus can use the modern technology to facilitate the communication process, for instance by using online databases and emails to create awareness to the internal stakeholders. The firm can use advertising media to communicate with the potential customers, who are an essential part of the company. The plan should include the goals of the brand, for instance the expected sales and the market share in the following fiscal year. The communication plan can include the objectives of each department; this can enable the stakeholders understand the essence of each strategy (Rugman & Hodgetts, 2003). Communication is a crucial element in establishing a healthy working relationship among the stakeholders. The plan should not be limited; it should accommodate the stakeholder’s opinions to enhance achievement of organizational goals. It should comprise of realistic and achievable goals that match up with the brand’s mission and vision statements. The communication plan should analyze the steps that the firm aims to consider in implementing the suggested strategies.
Two Corporate Governance Mechanisms used by Lexus
The brand uses the internal and external control mechanisms for the governance purposes. Lexus uses its internal advisory board, the Corporate and social responsibility committee, and the board of corporate auditors to control its internal governance mechanisms. The all-inclusive decision making-process enables the stakeholders to attain constructive ideas that enhance the brand’s development plan. The management team has established internal structures that act as check and balances for the firm’s operations; this ensures that employees maximize their capability to achieve organizational objectives.
The external governance mechanism comprises of entities outside the organization such as the government, financial institutions, and regulators (Furrer, 2011). Lexus uses the guidelines from these institutions to enhance its compliance capability, both legally and in debt management. These entities enable the firm to maintain its core values in the production and service delivery process, which contributes to its success in the automotive industry. The outside corporate auditors act as checks and balance for the brand’s expenditure forums; this increases the level of accountability among the employees, which increases organizational efficiency (Yamaguchi, 2012). The auditors provide advisory services to the brand’s management team on how to survive during the hard economic times. This measure enabled the firm endure the recent economic financial crisis that occurred in 2008.
Effectiveness of Leadership in the Lexus’ management
The brand uses a hierarchical management approach with the senior board of directors at the top level. The managers delegate duties to the subordinates, who act upon the orders to achieve the organizational targets. The firm uses the all-inclusive decision-making approach; this strategy enables employees to contribute their opinions in the governance process (Yamaguchi, 2012). There is increased innovativeness and creativity due to the exchange of ideas. The teamwork aspect enables the Lexus retain its leading position in the luxury automotive industry. The managers apply the interactive mechanism in their governance activities; this gives the employees a sense of belonging, and contributes to their productivity. An appropriate recommendation that can increase the firm’s efficiency in management involves forming a committee, comprising of a number of best performing employees. This committee can govern other employees, identify their weaknesses, and help them to correct the errors. This management aspect can enable the firm to increase its management effectiveness.
Lexus’ efforts to be an Ethical Brand
Lexus has focused on manufacturing products that are environmentally friendly. People are now aware of the need to enhance environmental sustainability; Lexus vehicles are designed to minimize emissions (Dawson, 2011). The firm produces fuel-efficient vehicles; the price of the products matches their value, which enhances the ethical responsiveness of the brand. The brand participates in races and other societal activities. Lexus obeys the government regulations regarding the operations of the automobile industry; these factors make Lexus an ethical citizen.
Lexus is the leading luxury automobile brand in the global market. The firm’s success is attributed to the diversification of high quality products and suitable segmentation of the market. The brand has a strong market share and innovativeness in its production process. Its weaknesses include high prices for the products and poor distribution channels. The firm requires increased promotion mechanisms to enable it expand its market share, especially among the medium and low-income earners. Lexus has a reliable management structure that enables it work towards achieving its targets. The internal and external governance mechanisms facilitate coordination and accountability among the stakeholders.
References
Campbell, D. J., & Craig, T. (2005). Organisations and the business environment. Amsterdam: Elsevier Butterworth-Heinemann.
Dawson, C. (2011). Lexus: The Relentless Pursuit. Hoboken: John Wiley & Sons.
Furrer, O. (2011). Corporate level strategy: Theory and applications. London: Routledge.
Kandori, Y. (2007). Japanese automakers' luxury brand names and their marketing sucess: A Q-study analysis of the Lexus' brand image among Indiana Lexus owners.
Liker, J. K., & Meier, D. (2007). Toyota talent: Developing your people the Toyota way. New York: McGraw-Hill.
Rugman, A. M., & Hodgetts, R. M. (2003). International business. Harlow, England: Prentice Hall/Financial Times.
Tueth, M. (2010). Fundamentals of sustainable business: A guide for the next 100 years. Hackensack, NJ: World Scientific.
Yamaguchi, J. K. (January 01, 2012). The Lexus rises again / [Jack Yamaguchi]. Automotive Engineering International, 120, 6.
